Five Point Holdings LLC (FPH) 2020 Q1 法說會逐字稿

Good day, everyone. Welcome to the Five Point Holdings First Quarter 2020 Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

Today's conference may include forward-looking statements regarding Five Point's business, financial condition, operations, cash flow, strategy and prospects. Forward-looking statements represent only Five Point's estimates on the date of this conference call and are not intended to give any assurance as to the actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could affect future results and may cause Five Point's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described in today's press release and Five Point's SEC filings, including those in the Risk Factors section of the most recent annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC. Please note that Five Point assumes no obligation to update any forward-looking statements. And now I'd like to turn the call over to Mr. Emile Haddad, Chairman and CEO of Five Point. Please go ahead, sir.

Thank you very much. Good afternoon, and thank you for joining us. I hope that everyone on your side is healthy. Today, I'm joined by Lynn Jochim, our Chief Operating Officer; by Erik Higgins, our Chief Financial Officer; and by Mike Alvarado, our Chief Legal Officer.

On March 16, we had our fourth quarter call, and I shared with you that the previous Friday, we had asked all of our associates to work from home. I also told you that we always run the company with a plan, which is ready to be implemented in case of an unexpected event which creates a major sudden shift. On that day, we started implementing that plan, which is comprised of the following: one, considering the potential for no land sales in Valencia and the Great Park for the remainder of 2020, we are managing land development operations to support -- to only support the office of our guest builders who are still moving forward with construction activity. If there's demand for builders earlier, we need approximately 45 days to finish development of home sites at the Great Park. And at Valencia, we have inventory ready for sale. We have benefited from the fact that approximately 2/3 of our total expenditures are variable costs; two, we also said in the past that 50% of our G&A related to our employment costs are discretionary bonuses we pay in January. That gives us the ability to reduce G&A significantly without the need to reduce our workforce if we elect not to pay or reduce our discretionary bonuses; three, we amended our internal financial authority policies to limit the ability to commit the company to binding contracts or approve invoices. The only people who have that authority since then are our CFO, COO, CLO and me; four, since March 16, the 4 of us have been at the office every day, making sure that the plan is implemented, that our associates are well and that we are doing what is needed as a responsible corporate citizen.

On the transaction side, since the middle of March and during our stay-at-home orders here in California, we closed the second takedown of 34 home sites at the Great Park for $20.3 million and 70 home sites previously sold in Valencia for $16.5 million. We carried the note on that deal that is due at the end of the year. We view these transactions as a vote of confidence in our communities by our guest builders and speaks to our strategic partnership with those buildings.

We are on the eve of taking the first step to memoralize our strategic partnership with the City of Hope by closing on the sale of an office building at Five Point Gateway Campus, which will be developed and operated as a comprehensive cancer center. This closing is much more than a transaction. It is a strategic partnership, which, in collaboration with other health care providers, will envision the future of health care and prove new concepts of health care delivery in our communities. This was the vision before COVID-19, and the impact of the virus on our lives is amplifying the need for a better way of health care delivery utilizing technology. It was fortuitous that we started planning for a substantial portion of our nonresidential land to be earmarked for health care, both providers and research.

In terms of builders home sales at the Great Park, the first 5 weeks of the stay-at-home order, we saw no home sales. Builders shut down their sales offices and started selling virtually. Over the past 4 weeks, however, we started seeing weekly sales go back to almost pre-COVID-19 levels. Last week, we had 10 net sales, which is pretty much our historical average for the Great Park. The lack of inventory of homes in general and in our markets, in particular, is helping maintain home values and bodes well for the future of the residential market.

This is especially true when it is coupled with historically low mortgage rates. On a different note, I have been asked to serve on the government's task force on business and job recovery, and I am co-Chairing the Capital Markets and Infrastructure Committee. The task force is not only looking at short-term plans to reopen California's economy, but is acting as a think tank of mid and long-term initiatives, ranging from housing to innovation to climate change.

Now I would like to turn it over to Erik, who will report on our Q1 financial results.

Thank you, Emile. Our 10-Q was filed on May 11, and a summary of our financial results was included in the earnings release issued earlier today. As Emile noted, the first quarter was an interesting one as we adjusted our business to address the potential impacts from the COVID-19 pandemic. In response to the pandemic, we have taken immediate steps to protect the health and wellbeing of our associates and to preserve the financial strength of the company. Our associates are working remotely and the team is analyzing the impact of deferred land sale revenues caused by the pandemic. Our financial performance in the first quarter reflects our investment in inventory expenditures at Valencia, the collection of management fees and an accounting valuation adjustment to our equity method investment in the Great Park Venture.

I'll start with our consolidated results and then address each one of our 4 segments. The company's consolidated revenues for the first quarter totaled $9.2 million and primarily reflect the recognition of revenue generated from management services. Equity and loss from our 2 unconsolidated entities was $30.9 million for the quarter. This includes the $26.9 million impairment, which we recorded against our investment in Great Park Venture. Total consolidated costs and expenses were $32.6 million, including $24.6 million of selling, general and administrative expenses for the quarter.

Net loss for the quarter was $53.2 million, of which $28.4 million was allocated to the noncontrolling interests, leaving $24.8 million attributable to the company.

Moving to the segment results. The Valencia segment is consolidated for accounting purposes. Revenues for the Valencia segment were $0.8 million, primarily related to agriculture and energy operations. SG&A expenses totaled $3.7 million for the quarter, and the Valencia segment loss for the quarter was $4.8 million.

The San Francisco segment is also consolidated for accounting purposes. Revenues for the San Francisco segment were approximately $1 million and were primarily related to management services. SG&A expenses were $3.6 million for the quarter, and the segment loss for the quarter was $3.1 million.

The Great Park segment includes operations of the Great Park Venture, the owner in the Great Park neighborhoods as well as management services provided by the management company to the Great Park Venture. Just as a reminder, we own 37.5% of the nonlegacy percentage interest of the Great Park Venture and 100% of the management company. The Great Park Venture is an unconsolidated entity, with our investment in the venture accounted for under the equity method of accounting. For segment reporting, we include the full results of the Great Park Venture as the venture's historical basis of accounting. The Great Park Venture is soft funding operation with no debt.

The Great Park segment revenues were $29.5 million for the first quarter, of which $22.2 million was related to the Great Park Venture and $7.3 million was related to the management company. The Great Park Venture closed 35 home sites during the quarter, which was the second and final takedown from a sales contract that was closed in the fourth quarter of 2019. The base purchase price for these home sites was $20.3 million. The first quarter net loss for the Great Park segment totaled $2.5 million consisting of $1.8 million of net income related to the management company and a loss of $4.3 million for the Great Park Venture operations. The company recognized a loss of $30.4 million on its investment in the Great Park Venture, which includes our share of the Great Park Venture's loss, and a 29 -- $26.9 million impairment was recognized against our investment balance.

For our Commercial segment, it includes the operations of Gateway Commercial Venture and management services provided by the management company to the Great Park -- to the Gateway Commercial Venture. We own 75% of Gateway Commercial Venture and 100% of the management company. The Gateway Commercial Venture is an unconsolidated entity, with our investment in the venture accounted for under the equity method of accounting.

Commercial segment revenues were $8.6 million for the quarter. Operating expenses, interest, depreciation and amortization totaled $9.2 million. The Commercial segment loss for the quarter was $0.6 million comprised of $0.1 million of income related to the management company, offset by $0.7 million loss for the Gateway Commercial Venture operations. The company recognized a loss of $0.6 million on its investment in the Gateway Commercial Venture.

I'll wrap it up with a few comments related to our balance sheet and our liquidity position. As of the end of the quarter, total liquidity was approximately $372 million, which was comprised of cash and cash equivalents totaling $248 million and borrowing availability of $124 million under our corporate revolver. Our balance sheet is solid with a debt to total capital ratio of 25.5 million (sic) [25.5%].

Let me turn it back to the operator. We'll now open it up for questions.

(Operator Instructions) We'll hear first today from Stephen Kim with Evercore ISI.

Appreciate the info. I wanted to ask you a bigger picture question first. The early signs are that the pandemic is driving a pretty significant shift in attitudes towards both home buying as well as recreation with regards to either home size, densification, working from home, communal venues and stuff like that. I'm wondering which of these shifts you think are temporary and which you think are likely to be more lasting. And can you give us an idea of how you think maybe some of the longer-lasting changes will influence what would be the optimal design of a master plan community such as yours in the future?

Well, thanks, Steve. That's -- it's a good question. It's a question that we obviously asked a lot. And look, my experience in conditions like this, and I've had that in the previous life, is you have to be very careful about extrapolating from a moment in time when we're all behaving in a very unnatural way because we're forced to do it. And I think that it will be a mistake to assume that because people today, for instance, are wary about being in higher density places, that, that means we're never going to see higher density.

I think what you have to wait for is what is the behavior of the consumer going to look like when this issue is behind us? Because there's no doubt that there will be a modification to the consumer behavior. I mean probably the simplest example is there's a certain segment of population that is the elderly people that was not comfortable using online shopping and because now they're forced to do it and they found that it is convenient, I am sure that, that actually part of the consumption is going to change because a lot of people are going to say, "It's nice. This thing was being delivered home."

I think that the work at home is going to actually force all of us as companies to start rethinking our whole model that we've been living with of employment for the last several decades, be it the 9 to 5, and all these things that I think were a product of the previous revolution, so the industrial revolution and the factory. That means that we're going to have to start thinking more about maybe some of our workforce might work part time or maybe even full time out of their home. And therefore, we should be thinking about designing homes with a much more fully equipped office. I personally think that technology and diagnostics at home and telemedicine is going to become a big part. And I think as a part, we will probably start thinking of that. I can tell you for us as a company, we are not ready yet to jump into any conclusion until we see what the consumer is looking for after this thing is behind us. Now the good news for us is when it comes to Great Park, the way we designed the Great Park with a lot of trails and open space and a lot of areas, today, is proving to be very helpful for our residents because people are going out and watch and being able to actually have that ability, whereas as in other places they don't. But I'm not in a position right now to jump to any conclusion. I think it's too early, and we are in a very unmatchable situation right now.

Yes, that makes sense. And certainly, with Great Park, your pivot to a little bit more of a health care focus certainly seems pretty present at this point. So I'm sure this is going to be an issue we'll hear more and will discuss more with you in the months and the years ahead, probably. The second question I had relates more specifically to Newhall. And just curious as to when you think you may have another round of land sales. Has you're thinking evolved or changed in any way regarding the next set of land sales there?

Sure. So I'm going to take you back to -- before the end of 2019 when we were guiding about our -- the number of home sites that we were expecting to sell. And at that time, we were talking about something around 500. We have more demand. And as a result, we ended up doing the 784, out of which the 711 closed and we just announced the -- actually, 781, and we just announced the closing of the other 70. That leaves us with about 257 of inventory standing right now. And I can share with you that we have builders who have now already started talking to us and have an interest in being there and actually moving forward with some of these transactions. We're not in need of it. We're not going to force it. We want to make sure that the builders who are actually -- already closed on their transactions are moving forward and comfortable. But I would not be surprised if you're going to hear some announcements in the near future about transactions with other builders. So we're going to do what the builders feel comfortable doing, and we're not going to force anything. I have 0 interest in discounting land over there. And -- but I think that based on what you're seeing right now, I think you have builders who believe that a market like that is in demand of housing and the environment is right.

We'll hear next from Truman Patterson with Wells Fargo.

Glad to hear you all are healthy. The first question on the impairment at Great Park, the $27 million impairment. Could you just elaborate on that a little bit what occurred? I imagine it's from writing off land and possibly some lower pricing, but can you just run us through the moving parts of that and some of your assumptions?

Thanks, Truman. And I was hoping that somebody will ask that question because it's probably one of those areas that people are misunderstanding, not because of anything, it's just because it's a little bit of an odd situation that has to do with accounting. So let me take a shot at it. And then if you need any more color, Erik will give you that. So there are 2 methods -- accounting methods that you use to analyze impairments. The first method applies to wholly owned assets, where it's a static analysis. It simply sells. If I look at the life of any deal that I own and if at the end of the day, I am able to prove that I'm going to recover my investment plus $1, then I'll start to invest. So it's really -- especially for assets that are -- the size of our assets and take as long, it becomes easy to look at an asset and say, look, if I have the time and I look at it, I'm going to be able to recover my investment plus $1. And that's why we don't see anything close to impairments on the other 2 assets. If we would have applied the same method to the asset itself, meaning the Great Park, it wouldn't be impaired. However, the accounting rule says that if we are in an unconsolidated venture, we have to do an analysis of our distributions from that venture and do a discounted method, which is a net present value of the scheme of distribution. So it becomes very punitive because now you're not looking at the static analysis, you're looking at a cash flow and discounted cash flow. And the reason why we ended up in an impairment of our investment is because we have a stream of cash flow that is coming out of that based on distributions, and we've been doing this analysis every quarter since we did the consolidation and -- back in 2016 and we haven't been impairing it. But what we did now after COVID-19 is we assumed that home prices are going to stay flat for 2020. And then because we delayed land sales, that ended up pushing back our distributions from the venture. And the combination of the 2, when you discount it and we use a 9% unlevered discount rate, there's a negative arbitrage that ends up creating an impairment to our bases because we marked our bases up in 2016 to market, and that's really why you have this impairment. Again, if I were to look at it as if I'm looking at it at the asset level, this will be far from being impaired. But because of the method of accounting for unconsolidated ventures, we end up having to impair our investment.

Okay. And if I'm understanding this correctly as well, I'm thinking if maybe you all did that analysis at the end of the quarter, at the end of March, whenever conditions were much more uncertain, whereas today, I believe you said Great Park demand was back to pre-COVID levels, I would imagine if you did that analysis today, you might not have written off the land. Is that a fair assumption?

Well, it's a very interesting point because we have that discussion even with our accountants. And there is actually -- there could have been a way for us to look at this situation as a temporary situation. And therefore, we could have waited until we see what happens and then make a decision whether there's an impairment or not in the second or third quarter. Because we are using a cash flow right now for an ongoing concern, and that's the cash flow that we're using to run the business, I did not feel comfortable at all making subjective decisions that override what the math is telling us based on cash flows we're using. That would have put us in a position to look like we were trying to avoid an impairment. If the math at that moment showed an impairment, we made the decision to take an impairment and explain what it is and the fact that this impairment has nothing to do with the value of the asset. It just has to do with the way the math works for an unconsolidated venture.

Okay. Okay. This next question is also on Great Park, and it's kind of a multipart question. But could you just give your -- the builder orders' cadence from March through May? Maybe a little bit more color as well as what incentives are doing there. And then...

Sure. I can give you -- yes.

Sorry. Could you also discuss your lot sales in Great Park? How you're thinking about those in 2020 and whether or not you're seeing builders starting to add to their lot positions or want to add to their lot positions in Southern California? Because we've been hearing a lot of builders are completely pulling back on the land market. Maybe more recently over the past week or 2, they've started to reengage in that a little bit more, but I wanted to understand that a little better.

Sure. So let me give you the -- I'm going to give you the sales numbers -- net sales numbers as of the beginning of March on a week-by-week basis. And actually, I'm going to go back even beginning in that so that everybody has a clear idea as to how the sales have moved. So in the first week of the year, we had 10 net sales, then 11, then 13, then 9, then 16, then 9, then 9, then 14, then we jumped to 21 and 28, that's the beginning of March, then we go to 9. And that's when we started the stay-at-home orders in California. At that point in time, we have 0 sales. We had negative 4, negative 3, then 4 sales and 0 sales. Those are the 5 weeks following the stay at home. Then we ended up having 9 sales, 7, 3 and last week, 10 on a net basis. So that basically has been the rate of sales. And as you look -- when you look at all of that, the 10 is pretty much an average, mind you. But builders, I think, except for maybe one builder, are still selling virtually and not from sales offices. So from what I said, you have 10 net sales without any interaction with salespeople or going and seeing models is pretty impressive, actually. So -- and we're watching the trend.

Let me answer the second part of your question, which is home site sales. So at the Great Park, because we have a cadence of sales, what we do is we usually end up making sure that we monitor the rate of sales per product and how it's moving. And as a result, we then bring on a product that will be either a replacement or something that would be similar to that product exactly at the same time. So we have a dovetailing between when one product is almost sold off and another product that is competing as that product comes online. And we do that for obvious reasons because we don't want too much overlap. Otherwise, you start compromising home values. So what we will do is we will monitor the sales support. That's why you see me looking at these sales every day. And what -- as I'm giving them to you in total sales, the way I look at them and the team looks at them is we look at them actually on a product by product. We then will start extrapolating and mapping forward what each of the products look like in terms of the burn-off, and that's when we bring that product line and put it out. So at the Great Park, it's different than Valencia, where we're not waiting for builders to come and express an interest. We will put a product out when we think the timing is right. And at the -- because of the fact that when we started seeing sales go down to 0, it's during that period that we made the decision that if the market is not going to come back, that we probably will not have any sales at the Great Park until next year of home sites based on the rates that we are looking at. Now if we maintain this rate over here, then I think we could be in a position to sell home sites by the end of this year. Does that help? Hello?

Yes. Yes. Sorry about that.

No problem. I just want to make sure that...

Okay. Yes. That definitely helps. Sorry, I was on mute. One other item, the incentives, how are the builder incentives trending?

How -- you mean, interest from builders?

Yes, the homebuilder incentives.

Incentives. I -- you know what, I don't think we've seen any real major incentives. It's just -- nothing that is unusual. It's probably very consistent with the same type of incentives you would see a builder give when they want to close their home work toward the end of the quarter.

We'll hear next from Michael Rehaut with JPMorgan.

This is Elad on for Mike. Thank you so much for all the color you gave on the sales trends, weekly sales trends. Very helpful. I just wanted to dive into the drivers of some of those moves. Maybe first, just what do you think was sort of the driver of the big jump at the end of February, early March when sales per week went up in those -- in that 20 sales per week type range and even a little higher? And then secondly, more recently, there was that dip maybe 2 weeks ago. So it went from the 0 range to 9, 7, and then get down to 3 and back up to 10. What do you think is kind of driving some of those moves?

Well, I mean, I think that -- let me answer them in 2 different ways because you asked, I think, about 2 different periods. I think that what we started seeing -- the drivers behind why all of a sudden we jumped to 21 and 28 in the beginning 2 weeks of March, honestly, I think that it probably was -- what I'm looking at the -- which ones were the sales, they were driven by 2 different reasons. One, we have a lot of sales on the first week, which is the week where you sold 21 part of Novel Park, which is the small product and the very approvable product. And I think it might have been driven by people's expectation that rates were going to go down, and that product is really a product that competes with rental in this market. So I'm speculating that it's probably people who were interested in a price point. And then the week after, out of the 28, we had 12 out of Rise, which is our new community that we opened. And we typically see a jump in the opening of a community for 2 reasons. One is excitement; and two, you would have had a lot of builders, who have had an interest from buyers and they convert them within a week, and therefore, you see a jump. So that probably will be -- those will be the 2 factors. In terms of the last 4 weeks, honestly, I think today, a lot of the driving factors behind buying are emotional and all driven by whatever the news is telling you. If you look at the news today and the fact that people are starting to talk about depression and loss of jobs and all of that and you're still selling homes, that tells you something. So I don't know if you asked me about why we had 3 in the last 4 weeks versus 9, 7 and 10. I really can't tell you why.

Okay. Fair enough. And then my second question is just kind of shifting over to your land development activities and kind of if you're reopening a lot of those, if you're starting to build towards that. And if you pushed out some of the home site deliveries, what you're expecting, kind of how far or what your thinking is about the potential timing around those deliveries and land volume.

So as I said, I mean, I'm going to take each of the -- 3 of these separately. So in Valencia, we have 257 home sites in inventory, and we could fairly quickly develop another 230. So we would go through the standing inventory first and if there's enough buyers for them that drive value and builders feel like it's time for them to move. And as I said, we've had people who have expressed interest. So we don't really need to spend much in land development to sell the first 257, and a lot of the major land development for the other 230 is already done. And so as a result, we have basically stopped land development for any of the future deliveries at Valencia, except for any activity that supports the builders' construction and moving forward.

At the Great Park, we basically assume right now that we're not going to have any -- the assumption we made when we put this plan together was that we're not going to have any home site sales until next year, and therefore, we totally stopped land development. But as we said, if we see that there's an opportunity to move up the land sales, and we will -- we can go ahead and do that. It will take us 45 days from when we start land development again to when we finish home sites so we can have delivery. So we're monitoring here every day. As I said, the 4 of us are together every day, and we are monitoring every one of these situations in real time ourselves and will make the right decision at the right time. But it takes us, as I said, about 45 days to deliver a home site at the Great Park. And I can tell you, if we see a rate of sales similar to what we've seen in the last 2 weeks, somewhere between 9 and 10, then chances are going to be higher that we're going to have more deliveries or earlier deliveries than we thought.

(Operator Instructions) Next, we'll go to Zelman & Associates, Alan Ratner.

I'm glad to hear everyone's doing well. First, just on the Great Park just given that you kind of just went through the analysis. I know you had been expecting distribution this year. It sounds like that's getting pushed out. So is it safe to assume now that kind of your internal expectations is now 2021 is when kind of cash will start coming in the door from Great Park? And if so, can you share any magnitude that you're currently anticipating?

Well, you're right. I mean we -- if we end up performing or actually ended up moving forward based on our existing plan that we've just stopped implementing in March, we will have no distributions out of the Great Park in 2020. We will have a distribution in 2021. Mind you, that's an asset that's self-funding and has enough cash over there to self-fund so that doesn't require any cash. And because of all of the measures we've taken to conserve cash, we feel very comfortable with where we are in terms of liquidity. And therefore, the fact that we will have a delay in distributions from the Great Park is not really going to have any impact on our liquidity or our ability to go forward.

Got it. Okay. That's helpful. And I guess the second one, I fully appreciate the comments and agree with them as far as not extrapolating what is going on today as far as longer-term investment decisions. But at the same time, I know you guys are in the midst of the planning process up in San Francisco, and that was a project -- or is a project where there's a very large commercial component to it. And for that matter, all of your projects have that. But specifically San Francisco because it's in planning now, how are you thinking about the future of commercial real estate? Because I know office use was certainly a big expectation there and now with remote working and -- there's just a lot of ideas that perhaps there might not be as much need for as much office space going forward. Are you thinking about adjusting those plans or contemplating that at all or maybe just kind of push that a little bit until there's a clear picture about what the future might look like?

So Alan, I think as I said before, we have been rethinking the uses of our commercial starting with retail and what we did in San Francisco when we made this conclusion that the outlet model is not the right answer, and we went through a couple of years to unwind that deal. We started rethinking that whole component in each of the communities. And at the Great Park, we concluded -- and with the partnership that we have now with the City of Hope and others that will come soon, we have made the decision to pivot a while ago to pivot to health care-related uses over here. And we have a lot of interest right now basically because the City of Hope is a big catalyst for all of that, and a lot of people want to be in that orbit. So here, it's easy. We've concluded what we wanted, and we are looking at it as a -- as if you're looking at a campus. We're looking at the health care providers with research, with housing, with lifestyle, with schools, with all the elements to start thinking of the Great Park as a campus in essence with the main source of -- the main commercial source being health care.

The same thing in Valencia, actually. We started a while ago looking at that, and we -- out of the first village over there, first neighborhood. We have 750,000 square feet of our commercial is earmarked for health care, and we have a lot of interested parties up there.

In San Francisco, our commercial is divided into Hunters Point and Candlestick. So on Candlestick, we have 1 million square feet of office. We have about 300,000 square feet of lifestyle retail, and we have about 7,000 homes. That's what Candlestick is. And as we said before, we're leading with Candlestick as our first phase. I can tell you that there's a very good chance that the 1 million square feet might also be health care-related. I can't speak about it yet. I don't know that I -- we have anything firm, but I -- don't be surprised if it also is something that touches health care as well. We came to a conclusion that of all of these different segments of commercial, probably industrial and health care are the safest right now. And our land is not earmarked -- or is not made for industrial. So that's why I think the long answer to your question is health care, health care and health care.

Got it. No, that's very helpful. Appreciate that. And then just a final one on kind of more builder appetite for land. I know there's been a few questions, and it sounds like builders have been performing on the takedowns up to this point. A lot of the publics, when they were reporting their first quarter, they said that they've been negotiating extensions on takedowns, 90 days, et cetera, and it didn't sound like you guys experienced that much. But is there any sense just from looking, not necessarily in your communities, but elsewhere, people you talk to, have the builders kind of come back off the sidelines again in terms of their appetite for land? Or are they still seemingly proceeding cautiously? Because the sales results, to your point, have been rebounding quite nicely so I'm just curious at what point do they feel comfortable enough to return to the level they were at before.

So I'm going to put them in 3 different categories. One category is a group that never stopped talking to us, and we have discussions. The buyer on the Valencia site could have easily walk away from the deal. And honestly speaking, Alan, it was KB Home. I called them. I know these guys very well. And in light of the fact that the world shifted since we did the deal with them and in light of the fact that every builder was at least publicly saying they're going to shut down their land acquisition, which is very usual, I called them, and they will confirm that, and said, look, if you are not confident moving forward, the last thing I want is for any of my builders in Valencia to move forward feeling like we're only doing it in order for them not to lose their deposits. So if you want, I can give you your deposit back, and we will talk at October '19 if you still have an interest. Or if you want to move forward, I'm willing to look at what your needs are and work through a deal that works very comfortable with you. They can make -- and said, "No, we would like to move. But if you could give us an ability to close with a note that gets paid by the end of the year after the year-end probably or something like or in November 30, we will do that." And that's exactly what we did. So you have people who still were engaging with us. And because of our relationship with builders, we're not a onetime seller, our discussion with the builders is more about the partnership. We have another builders that -- builder that was interested but didn't want to close before year ahead. And we're engaged with that builder. We're talking to them. And we basically are having the same conversation if there's something that works for everybody because we are living in an environment that's unusual.

And so you have builders and many other group of builders, second group, that went silent, and then in the last probably week or 2 started making calls and talking to them and others about, hey, we haven't gotten the green light yet, but it sounds like we might be able to start looking at acquisition again. And if we're going to do that, we want to be looking in the markets that we feel comfortable with. And Valencia and the Great Park are easy ones to look at.

And then we have a group of builders who have basically still said there's still a mandate from corporate, no acquisition. And therefore, we can't talk about anything, but we'll see what happens in the future.

And is that third group still a large number? Or is it -- is that diminishing?

You know what, it's interesting because the group of builders in totality is not large anymore. I mean with the consolidation and with the fact that we have some builders who are not even in our markets, I mean, we're talking about -- probably about less than 10 builders that we actually talk to. So I would say, of the first category, there's about 3. On the second category, there's about 2 or 3. And then the last category is the same. So it's split about 1/3, 1/3, 1/3.

With no other questions, on behalf of Five Point and Emile Haddad, I'd like to thank everyone for participating in today's call. And that will conclude today's conference. You may now disconnect.

Thank you, everyone.